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What Happens When Two Insurance Policies Cover the Same Accident?

If you are injured in an accident and the other driver lacks sufficient insurance to cover any damages, you may turn to your insurance policy’s uninsured motorist coverage. But what happens if you are eligible for uninsured motorist coverage under two different insurance policies? Which policy has priority? The Georgia Court of Appeals recently addressed this question.

Sentinel Insurance Company v. USAA Insurance Company

This case began with a rear-end collision. One driver sued the other for negligence. The plaintiff also served two insurance companies as co-defendants. She claimed eligibility for uninsured motorist benefits under both companies’ policies.

The first insurer provided the plaintiff with a commercial automobile liability policy for her business, a liquor store organized as a Georgia limited liability company. The second insurer provided a personal insurance liability policy to the plaintiff and her spouse. The vehicle the plaintiff was actually driving at the time of the accident was a business vehicle covered by the first policy.

The trial court determined the uninsured motorist coverage under the first policy—that is, the one covering business vehicles—had priority over the second policy. But the Georgia Court of Appeals reversed. While it may seem obvious that the business policy would automatically cover an accident in the business vehicle, the Court of Appeals explained the proper test in cases like these is which uninsured motorist policy is “more closely identified with” the plaintiff.

In prior cases, the Court of Appeals has said an insurance policy held by an individual has priority over a policy held by a corporation. Conversely, a policy held by a self-employed sole proprietor has priority over a family policy. In this case, the plaintiff held her business policy as a limited liability company, a business structure that exists somewhat between a sole proprietorship and a corporation.

Up until this case, the Court of Appeals said it had not directly addressed the priority of an insurance policy held by a limited liability company. The Court noted that unlike a sole proprietorship, a limited liability company, even one composed of a single member, is still a “distinct legal entity capable of being the true named insured on a contract.” This meant the plaintiff’s relationship with her business was more like that of an employee to a corporation.

Based on that determination, the Court said the plaintiff was “more closely identified with her family policy than with the business policy.” The personal insurance carrier should therefore be considered the “primary” uninsured motorist carrier for purposes of the lawsuit. It is important to note the Court of Appeals only addressed this immediate question of insurer priority. The appeals court did not address the merits of the plaintiff’s underlying lawsuit against the defendant. It is possible the trial court will ultimately rule for the defendant, in which case neither insurer will owe anything. If there is a judgment for the plaintiff, however, the personal insurer will be on the hook first for any damage award.